News from ERO September 2000

12
Asian Perspectives: Mobilizing Resources Issue No. 9, September 2000 Asian Development Bank European Representative Office P.O. Box 100147 60001 Frankfurt am Main, Germany Rahmhofstrasse 2-4, 60313 Frankfurt am Main, Germany E-mail: [email protected] Telephone: (+49 69) 920 21 481 Facsimile: (+49 69) 920 21 499 ERO Web Site: http://www.adb.org/ERO/ ADB Web Site: http://www.adb.org Countries Covered: 14 European members: Austria, Belgium, Denmark, Finland, France, Germany, Italy, The Netherlands, Norway, Spain, Sweden, Switzerland, Turkey, and United Kingdom Regional Representative: Keon-Woo Lee NEWS from ERO The President observed that the roles of the state and private sector in develop- ing countries are changing. “We must explore ways to mo- bilize and to utilize re- sources to meet the needs of our develop- ing partners,” he said. The Forum drew a mixed and informed audience who partici- pated in debate and discussion. On the first day, an open panel discussion was hosted by the French Ministry of Economy, Finance, and Industry. The in- terests of more than 250 participants varied widely, but remained within the general A t the opening of the Sixth Annual Forum on Asian Perspectives, held jointly by the Asian Development Bank (ADB) and The Organisation for Eco- nomic Co-operation and Development (OECD) Center in Paris on 3-4 July, ADB President Tadao Chino noted, “Asia faces daunting devel- opment challenges at the same time official development assis- tance is becoming in- creasingly scarce.” The Forum’s theme, “Development Resource Mobilization in the Postcrisis Period,” was thus particularly appropriate, he said. President Chino Tours Spain, France, Germany A DB President Tadao Chino visited Spain and France from 29 June to 4 July and Germany from 10 to 12 July to promote greater awareness of de- velopment trends and opportunities in the Asian and Pacific region. On 29 June, at a meeting held in Madrid to inform Spanish bankers of business opportunities in the region, President Chino detailed ADB’s new private sector devel- opment strategy and enjoined partici- pants to harness their experience of Latin American business in the context of Asian economies. Angel Martín-Acebes, Subdirector Gen- eral, Ministry of Economy and Finance, offered the Spanish Government’s support, citing that it had contributed recently US$2 million to ADB’s Technical Assistance Trust Fund. On 30 June, President Chino reiterated his message to leading Spanish ADB Features Harmonizing Procurement Procedures 3 Improving Financial Management and Governance 6 Where Do We Stand on Bureaucratic Performance? 8 The Bank of the Future 10 News Briefs Spain Launches Fund to Fight Poverty in Asia and the Pacific 2 ADB Lending Rates for Second Half of 2000 2 ADB Directors for European Members 2 Environmental Profile of Tajikistan 3 ERO Fields 170 Missions 4 ADBs 34 th Annual Meeting to be Staged in Honolulu 4 ADB to Open Resident Mission in Mongolia 5 ADB News Releases on the Web 7 EROs Web Site Comes to Life 7 ADB Joins Frankfurt Book Fair 2000 9 ERO Calendar 2000 12 (continued on page 5) (continued on page 4) Funding is needed to reduce poverty in Asia. IN THIS ISSUE

description

This quarterly series represented ADB's work in Asia and the Pacific across its 14 European member countries. Five brochures were published between 2001 and 2002 including original articles titled Where Do We Stand on Organizational Performance? The Bank of the Future, Initiatives to Bridge the Digital Divide, E-Business: Big Business or Bermuda Triangle? Challenges to the International Order, Opportunities for Private Sector Investment, Private Financial Organizations Struggle to Find Green Solutions, Reading the Future, Output Accomplishment and the Logical Framework, A Note on Land Degradation, Deforestation Benefits, Seeing the Forest and the Trees, Flooding in Bangladesh, and Institutions for Development.

Transcript of News from ERO September 2000

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ERO

The President observed that the rolesof the state and private sector in develop-

ing countries arechanging. “We mustexplore ways to mo-bilize and to utilize re-sources to meet theneeds of our develop-ing partners,” he said.

The Forum drewa mixed and informedaudience who partici-pated in debate anddiscussion. On the firstday, an open paneldiscussion was hostedby the French Ministryof Economy, Finance,and Industry. The in-

terests of more than 250 participants variedwidely, but remained within the general

�t the opening of the Sixth AnnualForum on Asian Perspectives, heldjointly by the

Asian DevelopmentBank (ADB) and TheOrganisation for Eco-nomic Co-operationand Development(OECD) Center inParis on 3-4 July,ADB President TadaoChino noted, “Asiafaces daunting devel-opment challenges atthe same time officialdevelopment assis-tance is becoming in-creasingly scarce.”The Forum’s theme,“Development Resource Mobilization inthe Postcrisis Period,” was thus particularlyappropriate, he said.

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�DB President Tadao Chino visitedSpain and France from 29 June to 4 July and Germany from 10 to 12

July to promote greater awareness of de-velopment trends and opportunities in theAsian and Pacific region.

On 29 June, at a meeting held in Madridto inform Spanish bankers of businessopportunities in the region, President Chinodetailed ADB’s new private sector devel-opment strategy and enjoined partici-pants to harness their experience of LatinAmerican business in the context of Asianeconomies.

Angel Martín-Acebes, Subdirector Gen-eral, Ministry of Economy and Finance,offered the Spanish Government’s support,citing that it had contributed recentlyUS$2 million to ADB’s Technical AssistanceTrust Fund. On 30 June, President Chinoreiterated his message to leading Spanish

ADB

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�pain agreed on 1 July to estab-lish a Spanish Cooperation Fund forTechnical Assistance to help fight

poverty in Asia and the Pacific. The AsianDevelopment Bank (ADB) will adminis-ter the fund, which Spain launched with acontribution of US$2 million.

“This welcome support from a highlyvalued member will strengthen our fightagainst poverty, which has become ouroverarching goal,” said ADB PresidentTadao Chino at a press conference inMadrid on that day.

The fund, which will be untied, willbe made available for technical assistancegrants, which are generally used for projectpreparation, advisory services, and projectimplementation. Spain has indicated that

it would prefer the assistance to be directedto poverty-related sectors, including watertreatment and supply, health, and education.

Spain has earlier committed overUS$100 million to ADB’s concessional AsianDevelopment Fund, which provides low-interest loans with long maturities to ADB’sleast developed members.

Since 1995, Spain has also providedcofinancing totaling US$135 million for fivedevelopment projects: the UlaanbaatarHeat Efficiency Project in Mongolia, theJamuna Bridge Railway Link in Bangladesh,Subic Bay Area Municipal Development inthe Philippines, the Fujian Pacific ElectricCo. in the People’s Republic of China, andan export financing facility to Thailand toaid its recovery from the Asian crisis. ■

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9he Asian Development Bank (ADB)has increased the lending rateson its US dollar loan facility from

6.46 percent to 6.53 percent per annum.The rate on multicurrency loans, on the

other hand, has decreased from 5.72 per-cent to 5.68 percent per annum.

The new lending rates apply from1 July to 31 December 2000. The interestrates on ADB’s multicurrency and US dollarloans are adjusted on 1 January and 1 Julyeach year.

For each facility, the lending rate isdetermined by adding a spread (currently0.6 percent per annum) to the precedingsix months average cost of the respectivepools of outstanding ADB borrowingsestablished to fund such loans. ■

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9he complexity of the documentsgoverning the procurement ofgoods and related services financed

by international aid agencies is a source offrustration, and long-time sufferers have of-ten asked these organizations to harmo-nize their documents.

Much of the complexity owes, nodoubt, to the difficulty of assuring economyand efficiency, equal opportunity, and trans-parency. But breakthroughs are beingachieved, and it is with pleasure that wewould like to brief the readers of ERO’sNewsletter on the latest developments.

All through the late 1990s, meetingson the subject were held regularly by inter-national aid agencies.

In February 1998, representatives ofthe African Development Bank, the Euro-pean Bank for Reconstruction and Devel-opment, the European Commission, theInter-American Development Bank, theUnited Nations Development Programme,and the World Bank met in ADB’s headquar-ters in Manila to discuss harmonization ofprocurement under their operations. Theyrecognized that harmoniza-tion would• reduce the likelihood of

procedural errors on thepart of firms in comply-ing with the differentrequirements of the inter-national aid agencies,

• lighten the workload onand costs to borrowers ofproducing distinct sets ofprequalification and bid-ding documents, and

• cut the time taken by theinternational aid agenciesin reviewing the documents to ensurecompliance with procurement guide-lines.To move ahead, they agreed to form a

working group embracing ADB, the Inter-American Development Bank, theEuropean Bank for Reconstruction andDevelopment, and the World Bank, whichwould tackle first the bidding documentsused in the procurement of goods. Procure-ment of goods is the main area of procure-ment for most international aid agencies.The intention was to produce a master bid-ding document reflecting best practices,

accepting that each organiza-tion would need to tailor itslightly.

In October 1999, the work-ing group reached agreement,and each organization has sincecustomized the master biddingdocument to the minimum ex-tent practicable. ADB’s standardbidding documents were final-ized and placed on ADB’s website in July 2000. But the work-ing group has also moved on toaddress the documents govern-ing prequalification of civilworks contractors and recruit-ment of consultants.

The working group ex-pects that the first will befinalized by the end of 2000, andthat the second will be wrappedup by mid-2001. The workinggroup will then harmonize thebidding documents for civilworks (both large and small) andturnkey contracts. The working

group is also col-lecting and ana-lyzing examples of service-type contracts, which com-bine the role of consultingand procurement. Examplesof such contracts are aerialphotography and interpre-tation, video productions,and textbook writing andpublication.

Last but not least, ADBhas been requested to lookfor ways to harmonize thedifferent guidelines for pro-

curement and the use of consultants. As incase of the standard bidding documents, itwill first be necessary to decide on a frame-work for the guidelines so that these orga-nizations have identical sections and clausetitles, even though the content of clausesmay differ. ■

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theme of seeking means of sustaining andaccelerating postcrisis growth and devel-opment.

The second day’s expert seminarconsidered five presentations from theorganizing institutions on mobilizingdomestic resources, the need for foreignsavings, privatization and the privatesector’s participation in developmentprojects, and the development policies ofmembers of OECD’s Development Assis-tance Committee.

“This partnership between ADB andthe OECD Development Center hasyielded, yet again, an excellent andstimulating conference,” said ChristineWallich, Director, ADB’s Infrastructure,Energy, and Financial Sectors Depart-ment (West) and concurrent Head, ADB’sPrivate Sector Group.

She added, “I think we focused onthe big issues for postcrisis Asia: transpar-ency, the role of the private sector in de-velopment, as well as the impact of theinternational financial institutions—including ADB—and official develop-ment assistance in overcoming problemsleft by the crisis.”

The Development Center’s PresidentJorge Braga de Macedo agreed. “We haveto recognize,” he said, “that this meeting ofthe Forum reinforced the idea that global-ization will only benefit states insofar as theycan adapt to it through policies and institu-tions that promote good governance.” Presi-dent de Macedo said he is particularlyexcited by the fact that the multidisciplinary

and multisector audience was virtuallyunanimous in its appreciation of the linkbetween globalization and governance:“The beauty of this event is that it allowsus to get a take on problems from a num-ber of perspectives. When these per-spectives start to converge, as we haveseen here during the Forum, solutionsbegin to appear.”

The process of convergence is still noteasy. Though he found the debate intellec-tually stimulating and relevant, Hafiz Ahmed

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9he Thirty-Fourth Annual Meeting ofthe Board of Governors of the AsianDevelopment Bank (ADB) will be

held in Honolulu, Hawaii from 9 to 11 May2001.

A program of seminars will be held overthe period of the meeting, commencing onMonday, 7 May.

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1��������/�)�������#3Pasha, Managing Director of the SocialPolicy and Development Center in Paki-stan, was particularly fascinated by thediscussion on the appropriate composi-tion of private financial flows for maxi-mum impact on growth anddevelopment. “More work needs to bedone,” he concluded.

From the perspective of the privatesector, Frans van Loon ofING-Barings, appreciatedthe special mix he found atthe Forum and used the oc-casion to chide the interna-tional financial institutionsfor their lack of proactivity.Van Loon said the meetingwas important to deliver theprivate sector’s point of

view on development in Asia to the mul-tilateral, academic, and media audience.“ADB has much more potential for effec-tively working with the private sector,” henoted.

As a result of the Forum, a book, Sus-tainable Recovery in Asia: MobilizingResources for Development, will be pub-lished in November. The volume will belaunched in several Asian cities as well as inFrankfurt, where the European Represen-tative Office is located. ■

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Hotel accommodations for AnnualMeeting participants have been block-booked by ADB’s Secretariat and will behandled by an agency in Honolulu. Detailswill be posted on ADB’s web site by 1 Oc-tober 2000. ■

For more information, send an e-mailto [email protected]

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�ince the European Representa-tive Office (ERO) was officiallyopened on 11 December

1996, its staff has fielded about 170missions to enhance public aware-ness of and support for the AsianDevelopment Bank in its 14 Euro-pean members. The countries mostvisited were France, Germany, andUnited Kingdom.

The interest groups met mostoften were government agencies,export and trade promotion organi-zations, and multilateral institutions.New interest groups include nongov-ernment organizations, academia,and the media.

These figures exclude work inFrankfurt, where ERO is located. ■

5

industrialists; consulted J. Folgado, theSecretary of State of Economy, to discussmatters of mutual concern; and met thepress. Shoji Nishimoto, Director, ADB’sStrategy and Policy Department; andChristine Wallich, Director, ADB’s Infra-structure, Energy, and Financial SectorsDepartment (West) and concurrent Head,ADB’s Private Sector Group, accompaniedPresident Chino.

On 3 July, President Chino attended inParis the sixth ADB-OECD InternationalForum on Asian Perspectives. He empha-sized that, with two thirds of the world’spoor living in Asia and the Pacific, povertymust be vanquished in the region for us towin the global war on poverty. To win thebattle against poverty, it is important toaddress the issue of development re-sources mobilization. Necessary steps inthis direction include efforts in• mobilizing domestic resources

through capital market development;• mobilizing long-term foreign

investment, including throughdevelopment finance institutions,through conducive environments;

• improving investment efficiencythrough further financial and corpo-rate sector reforms; and

• promoting coordination and partner-ships between the public and privatesectors.

At OECD, President Chino held talkswith Secretary General Donald J. Johnstonand Deputy Secretary Generals SallyShelton-Colby and Seiichi Kondo. Theyagreed to strengthen cooperation to im-prove corporate gover-nance and public sectormanagement and reducepoverty.

Later that day, PresidentChino joined leading Frenchindustrialists and gave fur-ther details of ADB’s newprivate sector develop-ment strategy. He also metStéphane Pallez, DeputyTreasury Director at theFrench Ministry of Economy,Finance, and Industry anddiscussed matters of mutualinterest, focusing on theviews, concerns, and inter-ests of the French constitu-ency.

On July 4, before flyingback to Asia, he met Antoine Pouillieute,Chief Executive Officer, Agence Françaisede Développement. President Chino wasaccompanied in France by ADB DirectorPatrick Thomas; ADB Alternate DirectorManuel Sanchez-Melero; S. Nishimoto; C.Wallich; Robert Salamon, Chief, ADB’s Of-fice of External Relations; Hisashi Ono,ADB’s Senior Executive Advisor to the Presi-dent; and K.W. Lee, ADB’s Regional Repre-sentative in Europe.

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On 9 July, President Chino returned toEurope to attend on 10-11 July the Tidewa-ter Seminar in Bonn. The DevelopmentAssistance Committee of OECD andthe German Government hosted the semi-

nar. On 11 July, he traveledto the DeutscheEntwicklungs Gesellschaft(DEG) in Cologne and dis-cussed with StephanKinnemann, Chief Execu-tive Officer, DEG ways tostep up the business rela-tionship between the twoinstitutions.

On 12 July, he visitedFrankfurt to hold talks at theKreditanstalt für Wieder-aufbau (KfW) and theGesellschaft für TechnischeZusammenarbeit (GTZ). AtKfW, he met Hans W. Reich,Chairman of the Board ofManaging Directors, to ex-change information on

planned and actual activities in the Asianand Pacific region.

Staff of ADB and KfW will now meetregularly to build relations. At GTZ, he metDirector General Wolfgang Schmitt toapprise him of ADB’s new strategies for pov-erty reduction and private sector develop-ment and to discuss operational issues.

ADB Director Uwe Henrich, H. Ono,and K.W. Lee accompanied President Chinoin Cologne and Frankfurt. ■

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9he Asian Development Bank(ADB) was declared the Asian andPacific region’s “Best Agency” in

the Asiaweek edition of 18-25 August.Asiaweek commended ADB for its focuson soft development issues such as gov-ernance and financial transparency.

Asiaweek’s commendation is based onresearch findings that governance arrange-ments strongly influence developmentoutcomes, such as infant mortality ratesand adult literacy levels. It also reflectsanalyses of the causes of the 1997 Asianfinancial crisis. ADB, like other fundingagencies, undertook major studies to iden-tify contributing factors to the crisis. Thestudies found that poor governance ar-rangements—particularly poor financialgovernance—had a major influence. Con-sequently, ADB identified two key reformpriorities: strengthening banking supervi-sion and regulation, and improving financialreporting standards and their enforce-ment.

There is a global trend to standardizefinancial reporting. In October 1998,finance ministers of the Group of 7endorsed the efforts of the InternationalAccounting Standards Committee to de-velop a comprehensive set of internationalaccounting standards. Earlier this year, theInternational Organization of SecuritiesCommissions recommended that its mem-bers allow multinational companies to useinternational accounting standards.

In June, the European Commissionrecommended that a single set of account-ing standards be adopted for corporate re-porting throughout the European Union.The Commission stated that it believesthat “the adoption of International Ac-counting Standards is the way forward.” InJuly, the meeting of European FinanceMinisters invited the European Commis-sion to prepare urgently a proposal forimplementing international accountingstandards. Even the US Securities andExchange Commission is consideringallowing international accounting stan-dards to be used for US financial reporting.

ADB is in tune with these trends. Inthe past, even though ADB provided sub-stantial support to improve financial man-

agement arrangements, these activitieswere not centrally coordinated. In June1999, the new position of Lead FinancialSpecialist was created within ADB’s Eco-nomics and Development Resource Cen-ter. The Lead Financial Specialist, with thesupport of a specialist team, is the focalpoint for ADB’s financial management ac-tivities. Aside from providing routine assis-tance to ADB staff on financial matters, hespearheads three specific initiatives.

Examining financial managementarrangements. ADB wants to support theestablishment of sound accounting and au-diting arrangements and practices in its de-veloping member countries. But clearpriorities must first be identified. A regionalstudy is under way to assess financial man-agement arrangements and capabilities anddevelop recommendations in seven devel-oping member countries. The participatingcountries are Cambodia, People’s Republicof China, Mongolia, Pakistan, Papua NewGuinea, Uzbekistan, and Viet Nam. Thestudy covers a broad range of issues withinboth the public and private sectors, includ-ing regulatory frameworks, professionalbodies, education and training, financialreporting standards, accounting and audit-ing practices, and external assistance. The

assessments and recommendations willhelp formulate an action plan for each coun-try. The action plans will not only provideguidance for each government but will alsogive information about the activities of ADBand other donors. Workshops are being con-ducted in each participating country to dis-cuss and debate the study’s findings andrecommendations. A regional conferencewill be held in Manila on 16-18 October topresent the study’s findings and recommen-dations for each country, and examineregional accounting and auditing trends.

Updating financial managementand financial analysis guidelines.Things have moved on since ADB’s guide-lines for financial management and finan-cial analysis were issued in 1989. There is astrong global push to improve accountabil-ity and transparency by using internationalaccounting standards. Also, much has beenlearned about assessing the financial viabil-ity of projects and the financial manage-ment capabilities of executing agencies.ADB’s guidelines for financial managementand financial analysis are being updated toreflect these developments, and a revisedset should be released by December.

Harmonizing financial manage-ment and financial analysis guide-lines. The multilateral development bankseach have their own operational guidelinesand procedures. Meeting the differing com-pliance requirements is inconvenient andcostly for developing countries. In response,the multilateral development banks haveestablished task forces to develop harmo-nized guidelines and procedures. Standard-izing guidelines for financial managementand financial analysis is part of the overallinitiative, but total harmonization will takeseveral years. At this point, the multilateraldevelopment banks are, therefore, stan-dardizing particular aspects of the guidelinesincluding auditor-selection procedures,adherence to financial covenants, tariff anduser charge policies, and treatment of sub-sidies, among others. ■

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9o improve the performance of bu-reaucratic organizations chargedwith implementing development

projects and programs, international assis-tance has traditionally employed the fol-lowing three approaches.• Improving technologies avail-

able to development managers,thereby enabling them to use re-sources more efficiently and to per-form more effectively. This transfer-of-technology approach includes fi-nancial methods such as budgeting,accounting, and expenditure control;improving the speed and accuracy ofinformation f lows, particularlythrough computers; and more ratio-nal methods of scheduling, monitor-ing, and implementing developmentprojects and programs.

• Rationalizing organization andprocedures and adjusting struc-

tures and methods to enhancemanagement control, save re-sources, increase efficiency, andhasten the delivery of services.Basically, this approach has entailedapplying to government operationsthe prescriptions and experiences ofthe scientific management movement.

• Strengthening bureaucracies associal institutions. This approachhas focused on building institutions inways that enhance their internalcapabilities and improve their abilityto interact productively with theirexternal environment and thus sustainthe development activities for whichthey are responsible.The three approaches described are

fairly technocratic, however, and have notalways been fully adapted to the uncertain-ties, complexities, and societal pluralismthat characterize the environments in

which they operate. Hence new methodshave been developed to complementthem.• Reforming structures. Structural

approaches have been concernedwith administrative decentralization,institutional devolution, the organ-ization of work to relax the rigidities ofconventional bureaucratic structures,and the use of paraprofessionals fromlocal communities and associations toimplement development projects andprograms.

• Reinventing operational proce-dures. The reform of operational pro-cedures has been concerned withinformation management to maintainthe integrity of information in bureau-cratic structures and with social mar-keting to determine what societywants and what methods of supplyingservices it would prefer.

• Motivating. Motivational approachesrelate to rewards and punishments,working conditions, participatorymanagement, and civi l servicecompensation.

• Strengthening accountability.More recently, we have also seengreater attention to responsivenessand accountability and a desire on thepart of the public sector to resistpolitical pressures at the level ofdevelopment project and programimplementation.

• Eradicating corruption. We are alsowitnessing renewed efforts to mini-mize corruption, negligence, and arbi-trary behavior in the public sector.The importance of management

education and training. But interna-tional assistance to improve bureaucraticperformance may have underestimatedthe value of enhancing managerial skills byeducation and training, and by establishingand strengthening training institutions andprograms. Clearly, the role of developmentmanagers is crucial to social and economicdevelopment and their management ca-pacities should be improved. This is neces-sary because the insights, attitudes, andskills that equip development managers fortheir various responsibilities come from

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many sources outside formal education ortraining.

To identify the areas for improvement,however, it is first necessary to identifythese responsibilities. Five functions orroles can be identified for developmentmanagers and, for each, targeted manage-ment education and training is required.

Instrumental functions. For the in-strumental functions of developmentmanagers, education and training shouldenhance• generic management techniques (e.g.,

financial, personnel and human rela-tions, informational, supervisory, struc-tural, and procedural); and

• program management skills (e.g., theprocesses of design, implementation,and evaluation of individual service,regulatory, enterprise, and promotionalactivities sponsored by governments).Political func-

tions. For the politi-cal functions ofdevelopment man-agers, education andtraining should rein-force• skills of policy

analysis, bothgeneric and spe-cific to the sub-stantive sectorsin which devel-opment managers are expected toachieve specialized competence;

• sensitivity to methods for coping withinterbureaucratic influences, societalforces, and political interventions thatimpinge on development projects andprograms; and

• appreciation of the differential benefitsand costs of policy and program out-puts on the publics they affect.Entrepreneurial functions. For the

entrepreneurial functions of developmentmanagers, education and training shouldenhance appreciation of the opportunitiesand limitations of proactive managementstyles outside normal operating routines.These include management interventionsthat attempt to modify policies, invigorateoperations, recombine resources in freshpatterns, and enhance both staff and publicparticipation in development projects andprograms.

Interorganizational functions. Forthe interorganizational functions of devel-opment managers, education and trainingshould develop

• analytical insights, such as linkagemanagement; and

• operating skills, such as environmentalmapping, required for policy and pro-gram implementation that involve twoor more government agencies andmulti-institutional service networks.Public interest functions. For the

public interest functions of developmentmanagers, education and training shouldstrengthen• skills in identifying and articulating

long-term societal goals and in shapingpolicies and development projectsand programs that implement thesegoals; and

• criteria and methods of dealing withthe ethical dilemmas that inevitablyconfront development managers.Performance evaluation. Although

the specific functions and roles of develop-ment managers vary,the criteria by whichtheir performanceshould be evaluatedcan be grouped un-der five headings.The common man-agement goals ofeffectiveness (e.g.,achieving intendedoutputs) and effi-ciency (e.g., the eco-nomical employ-

ment of resources) remain necessary. Theyare not, however, sufficient guides for de-velopment managers.

Accordingly, management perfor-mance must also be oriented toward, andassessed by, three other interconnected val-ues. These are responsiveness (e.g., suc-cess in meeting actual demand and theneeds of society while heeding its prefer-ences and convenience), outreach (e.g.,success in promoting participation and re-source contributions from society), andsustainability (e.g., success in ensuring thecontinuity of services by innovating andadapting to new circumstances, maintain-ing support from society, and garnering therequired resources).

These are the demanding but never-theless attainable criteria by which devel-opment managers should expect to beevaluated. ■

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Earlier this year, I attended in Frankfurt, Germany a confer-ence on “The Bank of the Future,” organized by the Inter-national Bankers Forum of Germany in association withDeutsche Bank, the Frankfurter Allgemeine newspaper, andEDS, an information technology and service company. Theconference was focused on the implications of the digitaleconomy and on the role of banks in the digital economy.It also featured a special lecture on the future of money.

The digital economy. The two pan-els on the implications of the digitaleconomy and on the role of banks in thedigital economy made little progress.Alarmed at the threat of Internet-basedcompetitors such as E-Loan—which in-vites favorable, on-line comparison withthe more expensive services provided by70 banks in the United States—the panel-ists argued that the Internet might impacton traditional providers of financial prod-ucts as it did on share trading. They stressed

9,��!��(��)��,��'����the nature of money has not changed funda-mentally for the last 300 years, but that it isabout to. In support of his argument, he de-lineated three mutually reinforcing trendscausing mutations in the international mon-etary system, in geopolitics, and in informa-tion technology. First, he explained that themutation in the international monetary sys-tem is because of the fact that “Big Money”is no longer on the side of governments: ithas different, multiple masters and is quitevolatile. This volatility is encouraged by thelack of an international standard of value andthe incessant fluctuations of the US dollar.Next, he pointed out that the mutation ingeopolitics owes to the end of the Cold Warand to globalization. Until the late 1980s, themain actors on the world stage were nationstates, acting through treaties and armies.They are now corporations or nongovern-ment organizations operating through dealsand lobbies. Last, he noted that the mutationin information technology is by reason of thecommunications revolution leading us fromthe industrial age into the information age.

In the industrial age, banks were pro-tected by the monopoly of access and werethe main profit centers. In the informationage, however, banks gradually lost their mo-nopoly of access through the successive riseof mainframe computers, personal comput-ers, and the Internet. Since money is an agree-ment and little else, Professor Lietaerobserved that it can assume new forms whenthe conditions demand it.

New forms of money now include creditcards, smart cards, e-cash, electronic purses,and Internet payment systems. But otherforms of money may also spread, such asthe frequent flier miles programs introducedby airline companies, which are reminiscentof the credit card innovations pioneered byoil companies and Diner’s Club. In additionto airplane tickets, these programs also al-low clients to buy other services, e.g., limou-sine transport and hotel accommodation.And, reportedly, British Airways has just en-tered into an agreement with Sainsbury’s, en-abling its passenger miles to be redeemedin that company’s retail stores across theUnited Kingdom.

Professor Lietaer made the case that theongoing consolidation in frequent flier milesprograms will encourage the emergence ofsimilar forms of money over the next two tothree years, and that a “global barter cur-

the need for banks to focus on core com-petencies, to realign horizontally, and toembark on permanent change manage-ment. However, they were not able to dis-cern the exact nature of the competitionfacing banks, and could, therefore, only rec-ommend wide-ranging preparations lack-ing a logical framework.

The future of money. In contrast,the lecture on the future of money pre-sented by Professor Bernard Lietaer1 wasenlightening. Professor Lietaer argued that

11

rency” will appear eventually. If banksignore this trend, corporations will set uptheir own countertrade departments andform alliances. Rather, banks should join thecorporations that take such initiatives, sincethey might wish to brand their namesthrough association. But, whatever hap-pens, money in the future will be backedincreasingly by baskets of services, as it usedto be backed by gold or silver. And, unlikepresent day currencies, the new global bar-ter currency will be stable and automaticallyconvertible. It will act as a real means ofexchange, rather than as a store of value. Itcould even provide a safety net against fu-ture currency uncertainties, or function incountercycle with business cycles.

In Germany, the number of meetingsheld to discuss topics such as those mentionedabove is high. So far, they have failed to pro-duce workable responses because the exactnature of the competition facing banks is stillnot readily visible. Nevertheless, two conclu-sions can be drawn from the discussions onthe digital economy and the future of money.

Conclusions on the digitaleconomy. It is not difficult to see thatbanks—that have until now profited just be-cause they are in a particular location—willfind, increasingly, that just being there is nolonger sufficient.2 Since the Internet makesgeography less and less important, the glo-bal economy will soon witness more andmore electronic, on-line banks that have nobranches. These low-overhead electronicbanks will be extremely competitive, andtransactions will be made via computer ap-pliances. There will also be less need forcash because most purchases will be settledthrough new forms of money, such as thosementioned earlier. Thus, banks will be es-pecially vulnerable to price wars, with cli-ents selecting banks only on the basis ofcosts and interest rates. Banks must there-fore find ways to maintain their identity andto justify their roles as middlemen by add-ing value.

To add value, banks must create, mar-ket, and deliver banking packages to nichesegments of the population. For this, theymust use software tools that make it easier

for their clients to learn about and use theirservices. They must intensify their pres-ence on the Internet by becoming closerand more responsive to their clients.

Clients would then be able to tell bankswhat they like and dislike, and banks wouldrespond by offering banking services tai-lored to the needs of individual clients. Thiscan be done with software that will, for in-stance, gather data from several accounts,analyze spending patterns, calculate tax li-abilities, view investments in “what-if” sce-narios specified against goals, build reports,and generate this data for spreadsheets andchart creation. Ze Project, a new electronicbank, is pioneering one such approach tocustomized home banking.3

Conclusions on the future ofmoney. The global barter currency maytake longer to eventuate than ProfessorLietaer expects. But it has intuitive appealand would cause a further segmentation inthe services provided by banks. This wouldrequire a different response from that just

3 Ze Project is the first portal devoted to home-based financial services. Ze Project is a newapproach to customer-bank relations, a website that invites clients (both existing and pro-spective) to discuss available financial serviceswith one another, a community that lets eachvisitor build his or her own ideal bank by de-fining and expressing specific investment needs,and a forum where users can participate in sav-ings-oriented games and competitions. It tar-gets European consumers and Internet users. Ithopes to meet their expectations with concreteresponses underpinned by clarity, accessibil-ity, round-the-clock service, efficiency, user-friendly services, and tailor-made services.

suggested. So, it may well be that only thelarge, traditional banks would be in a posi-tion to respond to the formation of counter-trade departments by large corporations,leaving smaller banks to reinvent them-selves as electronic, on-line banks provid-ing customized home banking. ■

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1 Professor Lietaer is currently Research Fellowat the Center for Sustainable Resource Devel-opment of the College of Natural Resources,University of California, Berkeley. His latestbook is The Future of Money: Beyond Greedand Scarcity.

2 Now, most people bank with an institution thathas a branch office near their home or neartheir workplace.

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